Market Power of Energy Retailers

Households and businesses are quite aware of the rising electricity costs brought about by energy retailers over the past ten years.

More recently, the spotlight has been on the major energy retailers and their reasoning for rising electricity costs passed onto their customers. 

By controlling more than 60 per cent of generation in New South Wales, South Australia and Victoria concerns would naturally be raised over whether there has been any sort of tactical behaviours by these big energy retailers to remain at the top. Particularly on their bid or non-bid to supply the National Electricity Market in an attempt to control the energy prices and their influence on wholesale prices. Their bidding activity may be well and truly within NEM barriers; however, it is not at all in the long-term interests of grid-connected energy consumers.

Looking for answers as to why the wholesale price of generating electricity has grown, it is suggested that the growing shares of generation and retail markets are the cause of electricity price increases passed onto consumers. Although there are regulations in place set by the Australian Consumer & Competition Commission, this number of shares allows retailers to manoeuvre around these regulations and find loopholes for their benefit.

Similar to the effect that increased competition has had on Australian supermarket prices, increased competition has the direct effect to lower prices that are set for consumers. With these major energy retailers keeping a tight leash on energy prices to control the market, competition on energy prices has not reached any peak level as yet. With the impeding economical effect that rising electricity costs is having on Australian households, retailers should be competing on price and striving to ensure the lowest price for their customers.

When the energy retail market has reached this stage of competition, it is expected that consumers will be more aware of the price that they should expect to be charged for energy across the various retailers and make the switch to a retailer that will lower electricity bills for their households and businesses.

Electricity use is not a privilege in Australia, it is a necessity and the power these retailers have to control the energy market, whilst this may be just for 3 Australian states, this should not be the case and should change.